Galaxy powers Samsung to record US$8.3bn profit

Reuters, SEOUL

Wed, Jan 09, 2013 - Page 15

Samsung Electronics Co, the world leader in mobile phones and memory chips, said it likely earned a quarterly profit of US$8.3 billion, as it sold close to 500 handsets a minute and as demand picked up for the flat screens it makes for mobile devices, including those for rival Apple Inc products.

That run of five straight record quarters may end next quarter due to weaker seasonal demand, though a strong pipeline of smartphones — the firm’s biggest earner — and improving chip prices have eased concerns that earnings growth could slow this year, powering Samsung shares to record levels last week.

“Investors are a bit concerned that Samsung’s momentum may slow in the first half. The smartphone market is unlikely to sustain its strong growth as advanced markets are nearing saturation despite growth in emerging countries,” LS Asset Management’s Kim Sung-soo said.

Samsung has outpaced Apple — its biggest rival and biggest customer — the US firm’s launch of the latest iPhone 5, with sales momentum boosted by the South Korean giant’s Galaxy II phone-cum-tablet, or ‘phablet,’ in the fourth quarter. Apple’s iPhone 5 sales were a little below expectations, analysts said.

While Apple rolled out one new smartphone last year globally, Samsung bombarded the market with 37 variants tweaked for regional tastes, from high-end smartphones to cheaper models. By comparison, Taiwan’s HTC Corp (宏達電) released 18 models, Nokia Oyj introduced nine and LG Electronics Inc 24.

Samsung, valued at close to US$230 billion, yesterday gave its earnings guidance for the period between October and last month, ahead of the full earnings release expected by Jan. 25.

Shipments of Samsung’s flagship Galaxy S III, which overtook the iPhone 4S in the third quarter to become the world’s best-selling smartphone, are likely to have slipped to about 15 million in the last quarter from 18 million in the July-to-September period, analysts estimate. However, sales of approximately 8 million Galaxy Note II ‘phablets’ should more than make up for that — pushing the company’s overall smartphone shipments to about 63 million.

“Samsung’s profit will drop in the current quarter because of decreased phone profits. It will launch the Galaxy S IV only in March or April so, without new models, phone sales prices will fall this quarter. For the whole year, Samsung will launch new models faster than Apple and have the upper hand in the smartphone market,” HI Investment & Securities analyst Song Myung-sub said.

The new Galaxy, widely expected to be released within months, may have an unbreakable screen and full high-definition quality resolution boasting 440 pixels per inch, as well as a better camera and a more powerful processor.

“Samsung’s smartphone shipments are likely to grow even in a seasonally weak first quarter. The early launch of the Galaxy S IV would drive second-quarter growth momentum,” said BNP Paribas Securities analyst Peter Yu, who predicts that Samsung’s operating profit will grow 25 percent this year to almost US$35 billion.

Samsung is expected to increase its smartphone sales by more than one-third this year and widen its lead over Apple because it offers a broader range of mobile devices, said Neil Mawston, executive director at market researcher Strategy Analytics, which forecasts that Samsung will sell 290 million smartphones this year, up from a projected 215 million last year.